Listed property's record beats cash and bonds

South African investors should add listed property stocks to their portfolios this year because of their track record in beating inflation better than cash‚ bonds and certain other equity investments‚ according to Grindrod Asset Management’s Ian Anderson.

Anderson said the listed property sector had performed well despite many asset managers warning it was too expensive as far back as 2006 and headed for difficult times. “Since 2006‚ when investors were warned to steer away from listed property‚ the sector has achieved on average 20% each year in (total) returns‚” he said.

Anderson said that since the 2008-09 recession‚ too many investors were thinking about the short term regarding the stocks they bought and changing asset allocations to beat short-term forces in the market. “While the temptation is to try and time markets by making dramatic asset allocation changes to reduce short-term volatility‚ investors are better served staying the course with the asset-class mix that allows them to achieve their investment objective in the long term‚” he said.

Property stocks were likely to beat consumer price inflation by at least 5% over the next five years according to Anderson. He said equities could do the same but would not necessarily perform as well as listed property. There was still value in investing in local property stocks compared to offshore property stocks. “If you strip some of the bigger stocks based in SA such as Growthpoint (GRT) and Redefine (RDF)‚ you are left with smaller stocks like Tower (TWR)‚ which offer tremendous value‚” he said. However‚ Anderson said there were some offshore stocks that deserved attention. One was Romanian retail player New Europe Property Investments (Nepi). Nepi focuses on shopping centres in Eastern Europe.

“Nepi is well run by a South African team based in Romania. It is part of the Resilient stable of property companies. "Nepi is walking over the property competition in Romania and I think it is only getting better for the company‚” Anderson said. The yields that Nepi was able to secure on development projects exceeded the company’s average cost of capital by a large margin‚ he said.

Gareth Stobie‚ head of capital markets at Grindrod Bank‚ meanwhile said he expected to see more investors buying into passive investments such as exchange-traded products (ETPs). “ETPs are becoming very popular because of how they expose investors to a diverse group of stocks or an index‚ and these selections have beaten unit trusts last year‚” he said.


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